Statement of Robert B. Reich Secretary of Labor before the Committee on
Education and Labor Subcommittee on Human Resources United States House of
Representatives [06/01/94]

Chairman Martinez, Representative Scott, and distinguished guests: I am
pleased to join you today in Alhambra to discuss the Administration's commitment
to equip all Americans to prosper in today's challenging economy, and
specifically the role of the Reemployment Act of 1994 in helping workers to
continuously adapt to the demands of our dynamic economy.

Before I get to the substance of my testimony, I wish to thank you, Chairman
Martinez, for agreeing to be an original co-sponsor of H.R. 4050, the
Reemployment Act of 1994. I also appreciate your support in helping to put in
place the first two pillars of the Administration's workforce investment
strategy -- the School-to-Work Opportunities Act and the Goals 2000: Educate
America Act. I will continue to seek your counsel this year to enact the
Reemployment Act -- another critical component of that strategy.

California is engaged in critical efforts to expand and solidify its
economic foundation and open up the way to a new period of long-term growth and
prosperity. A key element in this effort is the skills development of its
workers. In your letter of invitation, you spoke of the challenge to American
cities that are on an economic competitive edge, teetering between renaissance
and ruin. I believe that we are up to meeting that competitive challenge and
that America's future and California's future are bright.

At the national level, and in California, the economic picture is clearly
improving. Production has surged nationwide in recent quarters; nearly 2.9
million jobs have been created since this administration took office -- over 2.6
million in the private sector. California is a story of two economies:
North-ern California mirrors the national trend and has experienced positive job
growth. Southern California appears to be turning around; for example, although
the Los Angeles metropolitan area lost about 280,000 jobs between April 1991 and
April 1993, it lost less than 34,000 jobs over the last year, mostly in
manufacturing. During this past year Los Angeles also has had strong gains in
the services (14,700 jobs) and construction (1,300 jobs) industries.

California's economy is in transition. In such times, government's role is
to make those transitions easier for working men and women. In the past 12
months, the Department of Labor awarded more than $100 million to assist
displaced Californians make such transitions. With these funds, local agencies
provide counseling, job search assistance, and classroom and on-the-job training
to help workers get back on their feet. This includes special projects to find
new jobs for defense workers in Los Angeles, Anaheim, and San Diego who were
laid off as a result of reductions in national defense spending, and other
projects to help workers who lost jobs as a result of layoffs in the electronics
and computer industries or because of the natural disasters that have literally
rocked Southern California. California also has been able to establish an
active military base closure team that provides services to workers at bases
scheduled to close.

Despite recovery across America, in 1993 the average duration of
unemployment nearly equalled its postwar peak. Some 23 percent of the workers
who lost their jobs in the most recent recession expected to return to their old
jobs. The rest recognized that their old job was gone for good -- the highest
percentage of permanent job loss ever recorded.

Permanent job loss and long-term unemployment -- especially against a
backdrop of recovery -- are symptoms of structural change in the economy. A
main thrust of this structural change involves the increasing importance of
skills, a shift in favor of workers with high-level skills and against those
without them. More than ever, what you earn depends on what you learn. If you
have the skills that come with a college degree, an associate degree, an
apprenticeship certificate, training provided by an employer, or other education
beyond high school, your odds for finding a job paying a middle-class wage are
good.

But unskilled workers -- or those whose skills have become obsolete -- find
their options shrinking as the old economy of stable mass production and
unchallenged American economic preeminence disappears. For both men and women,
and at every level of educational attainment -- college degree, some college,
high school graduate, high school dropout -- the earnings gap between the
skilled and the unskilled is widening.

A typical college graduate, for example, earns seventy percent more than a
worker with similar demographic character-istics, but who has only a high-school
diploma. Comparable trends apply for the risk of unemployment, and for access
to pensions and other benefits -- those with skills do well; those without them
are increasingly vulnerable.

While traditional paths to the middle class for workers without college
degrees appear to be narrowing, new, successful routes are opening -- sometimes
even in the same industries. For example, in San Jose, where workers with
obsolete skills have suffered from relentless waves of layoffs, the Center for
Employment Training provides intensive skills training, coupled with basic
education, to disadvantaged clients and dislocated workers. Companies like San
Jose's Touche Manufacturing -- which builds computer shells -- hire as many of
the Center's graduates as they can get.

In industry after industry, managers recognize the importance of high-level
skills. While ultimately each American has to take responsibility for his or
her own economic destiny, we must bolster our individual efforts with a national
response to the challenge of economic change, and business as well as all levels
of government each has a role to play in forging that response.

Americans are used to economic challenges. Less than a century ago, for
example, we mastered the move from the farm to the factory. Today, many
Americans confront the challenge of moving from the factory to the computer
workstation. I have no doubt that today's Americans are as determined and
resilient as their predecessors four generations ago.

National Economic Trends

Global competition, defense downsizing, technological advances, and
corporate restructuring are combining to produce new levels of anxiety about job
security. A recent New York Times poll revealed that nearly four out of 10
employed Americans fear that they might be laid off, or forced to take a pay cut
or reduced hours, within the next two years. No segment of American society is
immune to job anxieties, and industrial upheavals affect top executives,
mid-level managers, and frontline workers alike. Those hardest-hit by economic
change, and those who stand to benefit most from a more effective reemployment
system, are the most vulnerable members of our economic community--women,
minorities, and the unskilled.

Government policies and programs must recognize and reflect these new
realities. We must not offer Americans the false hope of burrowing into a
single job for life. Instead, we must equip them to find security through the
skills and flexibility that will let them face a changing economy with
confidence.

California is doing so. It has recently reinvigorated its State Job
Training Coordinating Council to accomplish four goals: Better coordinate
training and employment resources, firm up links between these programs,
increase capacity of education and training providers to respond with high
quality services, and enhance State and local partnerships.

The goal of the Administration's workforce investment strategy is to
establish a system of lifelong learning that enables all American workers to
constantly build their skills. We've begun with a path-breaking school-to-work
plan that cuts across institutions to build the skills of all students,
particu-larly the often-forgotten three-fourths of our workforce that does not
graduate from college.

Through the School-to-Work Opportunities Act, which President Clinton signed
into law last month, young people will receive classroom experience, coupled
with worksite training, during the last two years of high school and typically
for at least one year beyond. This will make it possible for thousands of young
people to follow the path of lifelong learning and develop the skills they need
to take advantage of the vitality and adaptability that drive America's labor
markets. California continues its progress in the design and implementation of
a statewide school-to-work system.

While visiting California this March, the President also signed into law the
Goals 2000: Educate America Act, another part of our workforce strategy. This
landmark legislation will facilitate the development of voluntary national skill
standards. Businesses will be working with educators, human resource
professionals, labor and community leaders, to identify the skills that are in
short supply and the training needed to master them. This way, workers can know
what to train for, and after completing their training, have a skill certificate
to show employers anywhere around the nation, a credential with real currency in
the labor market.

The newly authorized National Skill Standards Board will benefit from the
pioneering work of many groups, including the American Electronics Association,
headquartered in Santa Clara. Under a Labor Department grant, the association,
on behalf of a broad coalition of electronics-industry employers, workers,
educators, and training, is developing voluntary skill standards for key jobs
throughout the high-tech industry.

The Reemployment Act

Our third workforce investment initiative -- the Reemploy-ment Act -- is our
boldest. Two months ago the President sent to Congress legislation that will
turn America's unemployment system into a reemployment system. Our current
array of unemployment-related programs was designed in an earlier time, to meet
the needs of a simpler economy. The system must be fundamentally reshaped to
meet the very different requirements of today's workers facing today's
challenges.

H.R. 4050, the Reemployment Act of 1994, is meant to significantly advance
this transformation to a reemployment system. Once it is fully implemented, it
will serve about 1.3 million dislocated workers each year--the full population
estimated to want and need reemployment services. The Act's design is based on
a rigorous assessment of what workers need to prosper in today's changing
economy, and on systematic study of what works for getting them into new and
better jobs. The Reemployment Act reflects four core principles:

First is access and program consolidation. The current patchwork of
programs for dislocated workers is inefficient, confusing, and frequently
unfair. The Reemployment Act will consolidate all six major dislocated worker
programs into an integrated service system geared to deliver what workers need
to get their next job, regardless of why they lost their last job. These six
programs will be folded into a single program with uniform eligibility standards
and streamlined delivery.

Instead of forcing customers to waste their time and try their patience
going from office to office, the new system will require States to provide
services for dislocated workers through career centers.

The Reemployment Act also allows States to compete for funds to develop a
more comprehensive network of one-stop career centers to serve under one roof
anyone who needs help getting a first job, a new job, or a better job -- and
that anyone covers students, welfare recipients, you, and me, as well as
dislocated workers -- and to streamline access to a wide range of job training
and employment programs.

The immediate move to consolidated services for dislocated workers will do
away with inequities they suffer with the current system and accelerate their
progress to reemployment. The gradual creation of universal one-stop career
centers, as States opt into the system, will have even more profound
consequences. It will counteract past tendencies to create wholly different
services and access channels for different sets of workers -- often segregating
the disadvantaged into separate delivery systems -- and facilitate access to
mainstream programs serving all citizens. It will reinforce the incentives for
streamlining and consolidation set up by other provisions of the Act. And it
will offer new opportunities for innovation, experimentation, customer
orientation, and service excellence.

One-stop service--coupled with new authority to waive rules and regulations
that block innovation and impede efficiency--creates a sturdy framework for
building more and more program consolidation into America's employment and
training system. As the one-stop component of the Reemployment Act is
implemented state by state, it will catalyze continual progress toward less
duplication and overlap, simpler rules, leaner administration, lower overhead,
less bureaucracy, and more efficiency.

Californians can relate to this. The North Valley Private Industry Council
(NOVA) in Sunnyvale has been a State and national leader in pioneering the
one-stop concept. Its one-stop career center has co-located service staff with
the Employment Service, is active in the area economic development, and develops
specialized services for targeted populations. Waiver authority will help State
and localities integrate the delivery of program services to all jobseekers.

The second principle is customer focus, giving workers a range of options
and letting them choose the services they need to get the next job. The system
the Act establishes offers a rich array of alternative services, to meet the
needs of a diverse workforce in a complex economy, including worker counseling
and assessment, job-search assistance, support services, training, and income
support for experienced workers who participate in long-term training.

Most dislocated workers want and need only information and some basic help
in assessing their skills and conducting their job search. These services are
relatively inexpensive, and have been shown to pay off immediately in less time
spent unemployed, and help dislocated workers do what they want to do -- get
back to work. The Reemployment Act will ensure that these services are
delivered early, when they can do the most good, and are targeted on workers
best able to benefit from them.

Better information is what makes the Act's customer focus meaningful. Too
often, workers must look for a new job without enough data, or with the dubious
guide of outdated or low-quality information. The Reemployment Act will bring
jobs data from the age of the horse and buggy into the age of the information
superhighway. It will combine job data systems and expand access to good data
on where jobs are and what skills they require. By bringing the nation's
workforce information up to world class standards, it will effect a relatively
inexpensive improvement with potentially major results.

The third principle is market-driven retraining for workers who need it to
get their next job. While most dislocated workers need only job-search
assistance to find where best to use their skills, some -- we estimate about 30
percent -- need to learn new skills. Past retraining programs have had limited
effect in part because they failed to ensure that workers were trained only for
skills in demand; because they had inadequate provisions for customer choice and
quality control; and because they relied too heavily on short-term training
programs that have proven ineffective at changing the prospects of typical
dislocated workers. Retraining, for workers who need it, can mean a sustained
program lasting a year or more.

Training that doesn't lead to a job cheats the worker, the taxpayer, and
everyone with a stake in a productive, flexible American economy. The
Reemployment Act links training with jobs in three ways: by giving customers
choices about where to get their training, by building up the Nation's
labor-market information system and offering all customers access to performance
information on training providers and jobs data, and by requiring a high-level
business majority on the board overseeing local training programs.

The fourth and final principle, which fortifies the other three, is
accountability. The Reemployment Act of 1994 restructures the incentives facing
all those who make up the system -- public officials, program managers, center
operators, service suppliers -- to make them treat workers as customers. Those
who do right by their customers, who deliver high-quality services leading to
positive workforce outcomes, will prosper in the new system. Those who fail to
do so will see their funding dry up.

Accountability means devoting resources to what works, and getting rid of
what doesn't work. It means streamlining and consolidating wherever possible,
so that workers don't need to spend their time navigating administrative mazes,
and so that taxpayers don't need to support unproductive bureaucracies. The
Reemployment Act puts the emphasis on results.

REA Benefits California

In a variety of ways, the Reemployment Act will benefit workers in
California and in other States.

First, the creation of single points of access at career centers will make
it easier for dislocated workers -- including those part-time and seasonal
workers who suffer permanent job losses -- to obtain readjustment services.
These centers will use the latest communications technology to minimize the need
for a worker to actually go to a center to receive basic information or apply
for services. Cali- fornia also will have the option of establishing on-site
transition centers similar to those at (examples of those currently on CA
military bases) to provide immediate assistance to those located where military
bases or plants are closing or streamlining.

Second, the employment prospects for many workers will be improved through
better labor market information on job openings, particularly outside the local
area and from "consumer reports" giving them meaningful standards to
evaluate services offered by education and training providers and career
centers. Some also will benefit by becoming self-employed in a different
occupation, since California will have the opportunity to provide dislocated
workers with Unemployment Insurance benefits while starting their own
businesses.

Third, workers who need longer-term training to get a new job will have
access to "reemployment insurance" -- income support through the UI
system that makes training practical. Beginning in 2000, all workers with one
or more years of tenure with their previous employer will receive capped
mandatory income support beyond the receipt of regular UI. Maximum income
support will be 52 weeks (26 weeks of UI plus 26 weeks of income support) for
workers with tenure of more than one year and less than three years, and 78
weeks (26 weeks of UI benefits plus 52 weeks of income support) for those with
three or more years. (The use of job tenure screens and a UI benefit screen to
determine eligibility for mandatory income support will have virtually no effect
on the eligibility of female and minority workers for such support.)

Fourth, we have committed EDWAA, the existing program for dislocated
workers, to providing $12 million per year over three years from the Secretary's
National Reserve Account to fund readjustment services for dislocated timber
workers in California, Oregon, and Washington. With the significantly increased
funding proposed for the Reemployment Act, it is more feasible to make such
commitments to assist dislocated workers in particular industries and
geographical areas.

REA Budget

Under the President's proposed budget plan for the Reemploy-ment Act, all
States are likely to receive large increases in funding for dislocated worker
services over the next five years. For example, California's funding would
increase from under $60 million this year to $157.6 million beginning this July
under the current EDWAA program to $206.5 million under the Administra-tion's
proposal for 1995. This July's increase (increasing California's funds for
dislocated workers by almost 250 percent) is the first downpayment for the
Reemployment Act which will serve all dislocated workers.

I want to make special mention of how the Administration's three-part
workforce investment strategy will affect the disad- vantaged and of the
Department's long-standing and very important programs targeted to the
disadvantaged. Be assured of our deep commitment to helping this group of
Americans compete in today's labor market and to creating a training and
employment system that better prepares economically disadvantaged individuals
for decent jobs. Indeed, to this end, we are undertaking a system-wide dialogue
with the entire employment and training community to achieve broad consensus --
in collaboration with the anti-poverty community -- on an action plan to
strengthen and improve job training and employment programs for this important
group. Nothing is being ruled out to better address the needs of the
disadvantaged -- including budget increases and/or legislative proposals if our
dialogue deliberations reach such conclusions.

Moreover, while our individual workforce investment initia-tives may not be
typically viewed as benefitting disadvantaged persons, these effort will be of
much use to them. The school-to-work initiative, for example, is targeted on
those who do not complete college and includes a 10 percent earmark for grants
to high poverty areas. The beneficiaries of the Reemployment Act are much more
likely to be poor than are other adults -- over one-fifth (21 percent) of the
families of workers displaced in 1990 and 1991 were living in poverty as opposed
to 14 percent for other members of the working age population.

Conclusion

Much of my testimony has been about the Reemployment Act which I have
attempted to depict as an effort to give Americans the tools they need to take
control of their own careers. The proposed legislation is inspired by the
themes of customer choice, accountability, universal access, and integration.
And it is informed by systematic attention to empirical evidence, and a deep
commitment to what works.

The evidence shows that skills pay off. The evidence shows that skills can
be learned. The hard-won experience from decades of economic change, and from
too many programs that failed to deliver as they should for workers and
taxpayers, shapes the structure of the Reemployment Act. Through respect for
the evidence, and through persistence in pursuit of the American dream of
prosperity, we can help prepare Americans to succeed in the skill-based economy
taking shape all around us today. There is no excuse for leaving a single
person behind.

This concludes my prepared remarks. I would be glad to answer any
questions.